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Amazon reportedly used a secret algorithm to jack up prices
(www.theverge.com)
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this post was submitted on 03 Oct 2023
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Isn’t this how retail pricing always works?
That basically sounds like automated price fixing
Price fixing is when sellers conspire to increase prices beyond what normal competition would support. The fact that the algorithm reduces the price below competitors’ when it detects they are not following a corresponding increase means it’s not price fixing.
Maybe it's the overall price of something else that's not shown
Tech Giants Settle Wage-Fixing Lawsuit
That did happen.
What's perceived as competitors can be allies to accomplish common goals. Though they settled the lawsuit, it's not like this got put out of practice. They refined it
This is the defining characteristic of price / wage fixing - out-of-band collusion of price setters to discourage competition. There isn’t even an allegation that this is happening here.
That's why it's so brilliant. If you can develop an in-band system to coordinate arbitrary price increases between firms then you have plausible deniability. Who needs price fixing if you can just temporarily increase price, see who's price matching algorithms follows, and act accordingly using an algorithm that acts so fast that consumers are none the wiser when the "negotiation" to increase price fails.
The fact that the impetus for the price increase is nothing more than to test if other firms will raise their prices to match an increase and has nothing to do with supply or demand of the product makes it transparent that this strategy achieves the effect of price fixing without the smoking gun of explicit negotiation and plausible deniability that they are simply engaging in "price leadership".
What happens when another retailer runs the same algorith? One tests the waters with a price hike, the other sees it and matches. The first detects the corresponding increase and maintains the increased price. Rise repeat.
I'm other words, this could be price fixing because making a temporary increase and seeing if competitors will match the increase is sending a signal to competitors that Amazon is willing to increase price if others match. The fact that they revert to a lower price doesn't absolve them from price fixing, it just means the negotiation to collude failed.
The fact that the only factor in play is whether the competitors also increase price makes it blatantly obvious that the increase has nothing to do with supply and demand.
I don't think you understand what price fixing is. Adjusting prices to market competition is not price fixing. This same concept can also lower prices if another vendor is selling the same item for less.
For instance, Amazon frequently will lower prices to match chewy and Walmart
I don't think you understand what's happening. Amazon's algorithm is not just increasing price to match competitors. They are temporarily increasing price beyond competitors to see if competitors will also increase their price. This is different because there is no original market force impetus for the price increase, they are just seeing if both they and a competitor can coordinate to make a permanent price increase.
Arbitrarily interesting a price to see if you're competitors will also increase is not adjusting to market competition. It's testing the waters for colluding on price. It's literally sending a signal that Amazon is willing to increase if others will match. Whether the agreement is made in secret or done in public using "plausibly deniable" price increases makes no difference.
Yes, market pricing is reactionary. Other sellers might also see increased sales when Amazon raises prices.
Probably why Amazon stopped using this pricing model.